The most comment myth about applying for credit cards that we need to get past is “applying for credit cards will ruin my credit”. It just isn’t true.
Here’s the truth:
- Applying for a credit card or loan will result in a “hard inquiry” to one or many credit bureaus which will negatively impact your credit score 2 to 5 points
- The impact of these inquiries fall off over time … meaning: When you apply for a credit card or loan, within the first 30 days you may see a 5 point hit against your score. 90 days after application (with all other things equal on your credit) you may see your score creep back up 1 point. 180 days out it may go up again. Over the course of 24 months the negative impact of that inquiry will be completely gone.
- When you have that new line of credit you’ll have an opportunity to INCREASE your score as you’ll now have the ability to:
- Establish additional successful / on-time payment history
- Prove your trustworthiness with additional credit and proper use of it (utilization)
- Increase your credit depth (how long you have accounts)
- Availability of credit (If a creditor has trusted you with credit previously you have an established relationship with them that you can use to secure additional credit if needed)
- Your credit IS one of your most important assets. If you cannot pay your bills in full every month you should not be applying / seeking additional credit.
I have been reading your blog for a while and know for the fact its hard to get people interested in credit card applications. I travel for a living and had a hard time to get my colleagues to understand about the credit cards applications. A part of me broke inside when someone from office used 80k miles to fly domestic. Anyways here’s the latest info I sent them and thought your readers might be interested too. (These are the cards that Avi applied for and was approved for):
Avi also sent over a screenshot from CreditKarma showing how his credit score INCREASED throughout his applications.
I don’t want this to serve as a message saying “apply for credit cards, it will make your credit increase”, that isn’t the point. Even with Rick’s perfect 990 VantageScore he was still initially declined on a Bank of America Virgin America card. I want to make sure we all understand the facts with an example other than Rick, or myself, or Shannon or Andrew, that by properly using your credit you can indeed increase your score AND see the world at prices we can afford.
Myth: applying for credit cards will ruin my credit … BUSTED.
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